STOCKS
Asian indices remain strong. Nikkei and Shanghai have risen sharply and have room to move further higher. Sensex and Nifty are also looking strong to extend the rally in the coming days. But the Dow seems to be losing momentum as it hovers near a crucial resistance. It can consolidate in a narrow range for a few days and a breakout of this range will determine whether the Dow will resume its rally or will see a corrective fall. DAX was closed yesterday.
Dow (25475.02, +91.91, +0.36%) remains stable above 25000. As mentioned yesterday, while above 25000, the index can remain stuck in between 25000-26000 for some time. A breakout on either side of 25000 or 26000 will determined whether the Dow will fall to 24500-24200 or rise further to 27000. We will have to wait and watch.
DAX (11586.85) was closed yesterday.
Nikkei (22248.05, +185.66, +0.84%) retains its strength and is heading towards 22500 in line with our expectation. As mentioned yesterday, 22500 is an intermediate resistance within the overall uptrend. While that holds, a corrective fall to 21500-21000 is possible before a fresh leg of rally begins to target 24000 over the medium-term. In case of a strong break above 22500, the preferred rise to 24000 can happen straight away.
Shanghai (2912.79, −2.65, -0.09%) has closed on a strong note above 2900 and sustains a well above it today. The bullish view of seeing a riset to 2975 mentioned yesterday remains intact.
Sensex (33303.52, +879.42, +2.71%) and Nifty (9826.15, +245.85, +2.57%) have risen further sharply in line with our expectation and keeps our bullish view intact. Nifty can surge to 10500 on a strong rise past 10000 – a key intermediate resistance. Sensex on the other hand can target 36000 on a strong break above its intermediate resistance at 34000.
COMMODITIES
Commodities are mixed today. Gold and Silver are stable near levels seen yesterday but near term is likely to remain bullish taking the prices to respective resistances above current levels. Copper looks bullish for the near term. Brent has risen sharper than Nymex WTI before the OPEC+ meeting on 4th June to decide on whether to extend output cuts of 9.7mln bpd to July and August. Near term is bullish for Crude prices.
Crude prices have been rising faster than expected. Brent (38.51) could test 40 in the near term. Although a target of 45 looks possible on the charts, we may look for a short corrective dip from 40 before a further rise towards 45 is seen in the longer run. Nymex WTI (35.50) is trading near levels seen yesterday unlike a sharp rise seen in Brent. The Brent-WTI spread is likely to widen in the near term, indicating bullishness for Crude prices for some more time. WTI could target 41 in the medium term, but a pause near current levels could be a possibility just now. Overall view for crude is bullish.
Gold (1751.70) is stable near levels seen yesterday. The range of 1700-1775 is likely to hold well for now with a possible test of 1775 before a dip to 1710-1700 is seen.
Silver (18.77) is also stable near levels seen yesterday and could slowly inch up towards 19 in the near term. View is bullish for the near term.
Copper (2.4625) has moved up slightly. Near term view is to see a test of 2.50/55. Uptrend is likely to continue for now while above 2.40
FOREX
Most currencies look strong. Aussie and Pound have moved up beyond our expected near term resistances and look bullish for the near term. Dollar Index and Euro are however stable near levels seen yesterday but while the index is headed towards 97.40/00, Euro could remain strong. EURJPY is stable too and could rise towards 120. Dollar-Yen is likely to remain below 108. Yuan could see some sideways trade in the 7.15-7.10 region while Rupee may strengthen to indicating a glimpse of strength yesterday when the currency rose to 75.3050. Upside for USDINR could be limited to 75.65
Dollar Index (97.89) is trading slightly lower today. As mentioned yesterday, we would continue to remain bearish on the index and would look for a fall towards 97.40-97.00 in the near to medium term.
Euro (1.1124) is almost stable today and while the Dollar index trades lower and extends towards 97.40, we may expect a test of 1.12 on the upside in Euro.
Dollar-Yen (107.69) is stable, continuing to trade in the range of 107.30-108.00. As mentioned yesterday, we need to see a break on either side of the range for directional clarity in the longer run. Overall, a dip below 108 is preferred.
EURJPY (119.83) has dipped a bit but we continue to look for a rise towards 120.32/35 in the near term. View remains bullish.
Pound (1.2490) has broken above our mentioned levels of 1.2445 and while the rise sustains, we may expect a rise towards 1.26-1.2640 in the medium term. View is bullish for Pound just now.
Aussie (0.6781) has broken above our expected 0.6760 rising towards 0.68 now. View is clearly bullish for the next couple of sessions. A corrective dip from 0.68 could be possible. Failure to see a fall from 0.68 could prove to be bullish for Aussie towards 0.70 in the longer run.
USDCNY (7.1207) has risen again but we may look for a fall towards 7.10 or lower in the near term while upside could be limited to 7.15 just now. Any re-escalation of tensions between US and China would again drag the pair higher to 7.15.
USDINR (75.56) rose back from 75.3050 yesterday to close at higher levels. We may expect a test of 75 on the downside in the near term as support near 75.50 is likely to weaken. Upside could be limited to 75.65 while a fall to 75.30-75.00 cannot be negated over the coming sessions.
INTEREST RATES
The US Treasury yields remains stable. While a near-term consolidation is a possibility, we expect the Treasury yields to move up eventually breaking this consolidation on the upside. The German yields are showing signs to break their key resistances that we are expecting to hold. A strong rise past these resistances will prove our bearish view wrong. The 10Yr GoI sustains well above 6% and keeps our bullish view intact.
The US 2Yr (0.16%), 5Yr (0.30%) and the 10Yr (0.65%) Treasury yields remain stable while the 30Yr (1.45%) has inched slightly higher. As mentioned yesterday 1.45%-1.40% is a good support zone that can limit the downside in the 30Yr. We expect the 30Yr to remain above 1.40% and move up gradually to 1.50% and 1.60% in the coming weeks. The 10Yr on the other hand remains stable with its 0.58%-0.71% sideways range. A breakout of this range will decide the next leg of move. We prefer the 10Yr to breach 0.71% and move up to 0.80% eventually.
The German 2Yr (-0.68%) yield remains stable while the 5Yr (-0.63%), 10Yr (-0.41%) and 30Yr (0.07%) have moved up. Contrary to our expectation, the 30Yr has risen past 0.05%. A further break above 0.10% will negate our bearish view and will turn the outlook bullish to see a rally to 0.20% and even 0.30% in the comingweeks. We will have to wait and watch. The 10Yr can move up to -0.35% on a strong break above -0.40%. A further decisive break above -0.35% will prove our bearish view wrong.
The 10Yr GoI (6.0422%) sustains well above 6% and has risen further in line with our expectation. Our near-term view of seeing a rise to 6.15%-6.20% remains intact.
